NEW DELHI: Finance Minister Nirmala Sitharaman, during the presentation of India’s Union Budget 2025-26 on February 1, 2025, emphasized the government’s commitment to sustaining the country’s rapid economic growth. Her ambitious budget aims to prioritize agriculture, micro, small, and medium enterprises (MSMEs), investment, and exports, which are seen as key drivers for job creation and enhanced global competitiveness.
Sitharaman remarked, "This budget is dedicated to accelerating growth, driven by our aspirations for a 'Viksit Bharat.' Our economy remains the fastest growing among all major economies," illustrating India’s resilience and ambition on the global stage. The budget is built on four fundamental pillars—Garib (poor), Yuva (youth), Annadata (farmers), and Nari (women)—ensuring economic growth translates to socio-economic upliftment across society.
The budget introduces transformative reforms across various sectors, including taxation, power, urban development, mining, and the financial sector. These structural reforms aim to stimulate investment, bolster productivity, and create sustainable growth trajectories for coming years. Highlighting India’s economic progression over the past decade, Sitharaman noted, "Our development track record of the past 10 years and structural reforms have drawn global attention. Confidence in India's capability and potential has only grown. We see the next five years as a unique opportunity to realize 'Sabka Vikas', stimulating balanced growth of all regions."
Among the most notable elements of the budget is the significant change to personal taxation. The government announced it would no longer tax individuals earning up to 1.28 million Indian rupees (approximately $14,800) annually, raising the previous threshold from 700,000 rupees. "The new structure will reduce taxes on middle class and leave more money in their hands, boosting household consumption, savings, and investment," said Sitharaman. This move is expected to result in approximately 1 trillion Indian rupees ($11.6 billion) loss to the Treasury.
The budget also extends its focus on social support measures, incorporating efforts to assist the poor, youth, farmers, and women. These moves come amid rising living costs, which has tarnished Prime Minister Narendra Modi's popularity, particularly as many Indian residents express concerns about their quality of life. With about one-third of the population considered middle class, the tax cuts are likely to spur growth by boosting consumer demand.
These anticipated changes led to positive reactions within the stock market; consumer stocks such as Maruti Suzuki and Godrej Consumer Products saw significant jumps ranging from 4% to 8%. Conversely, infrastructure companies experienced slight downgrades as the government's modest increase to capital spending—up to 11.21 trillion rupees compared to 10.18 trillion from the previous year—failed to meet investor expectations.
Looking more widely at economic forecasts, the government expects growth to slow for its fifth largest economy, with looming threats such as high food inflation and frail urban demand dampening private investment. Current per capita income stands at around $2,700. Concerns about economic trust were expressed by economist Sakshi Gupta of HDFC Bank, who remarked, "The tax cut is likely to spur consumer demand and savings by the middle class..."
Summarizing its ambitions, the Union Budget aligns with the government’s vision for 'Viksit Bharat', which encompasses eradicative strategies for poverty, the pursuit of quality education, and healthcare expansion. The commitment to infuse the agricultural sector aims to position India as the "food basket of the world" and also stresses gender-inclusive growth by targeting higher participation rates for women.
This budget sets decisive courses for India's future, with clear focuses on industrial expansion, social welfare, and infrastructural development. With the outlined reforms and ambitious targets, the government under Modi seeks to propel India toward greater prosperity. The coming years are poised to be pivotal, transforming these aspirations and reforms set forth within the budget messaging.